US Employment Data Weaker than It Appears

The details of the US employment data are weaker than the headline, but the real take away is that the report will not change expectations for the Fed to continue to taper, or change when the market expects the Fed to actually raise rates. This is not until the second half of next year. The 175k rise in the nonfarm payroll, which includes 13k increase in government workers, was above expectations. We too thought the risk was on the downside. The back two months were revised to show another 25k jobs. The weakness of the report lies in the fact that the unemployment rate ticked up to 6.7%, even though the participation rate was unchanged at 63.0%. For five months now the participation rate is broadly stable. There is still no evidence that the loss of emergency benefits has prompted people to drop out of the labor market, which we had expected. The other and more important element of weakness is with the fall in the work week. It slipped to 34.2 hours, from 34.3 hours in January, but was revised down from 3.44. This is worth several hundred thousand full time equivalents. It is likely due to the weather. Those involuntarily working part-time actually fell by 71k. Separately, the Canada's jobs data were disappointing. Instead of grow 15k jobs, Canada lost 7k. However, the details were better than the headline. Full-time positions rose 18.9k after the 50k in January. It was a loss of part-time jobs, almost 26k after 21k loss in January. The US dollar has turned better bid in aftermath of the data (which included, slightly worse than expected US trade figures and somewhat better than expected Canadian figures). The US dollar popped to CAD1.1085, helping to turn the technical indicators more constructive for the greenback. The euro has come off form its new cyclical highs, Initial support is seen near $1.3850. Sterling's lagging a bit, and is coming into support in the $1.6700-20 area., The dollar jumped to JPY103.60 in a bit of a buying frenzy, but has stalled in front of the 61.8% retracement of this year's drop.